You can put Puppy in the same directory as DSL, and just list it in menu.list (they tell you what to write in on their site). As Hats noted, listing different DSL versions is only problematic if the backup file, etc. has the same name and it is in the same directory.

I'm not too sure if DSL's default backup/restore options can be used with a subfolder though. You might need to edit some scripts. (Or just have the backup.tar.gz renamed upon shutdown, and placed in .../mydsl/ )

That's pretty clever. You could have powerdown.sh use the knoppix_name parameter (or even a custom param) to juggle all backup archives according to that parameter, saving the need to modify (and potentially maintain) multiple powerdown scripts.